Union Tribune

March 6, 2003

FERC plans to disclose evidence in power case


WASHINGTON Federal regulators are preparing to lift the veil of secrecy surrounding recent allegations that power sellers engaged in massive manipulation of California's power market in 2000 and 2001.

Federal Energy Regulatory Commission Chairman Pat Wood told Sen. Dianne Feinstein that the commission plans to lift the "protective order" shielding mounds of evidence that state agencies and utilities submitted to back the allegations, Feinstein said in a written statement.

Wood also told a House Energy subcommittee yesterday that the commission, commonly known as FERC, is "in the process of declassifying now."

The data include tapes of energy traders' phone conversations, depositions and hundreds of other exhibits. Feinstein, D-Calif., has persistently called for the release of the information, which California officials gathered to bolster their case for $8.9 billion in refunds from electricity generators and marketers.

California officials say the data, submitted to FERC on Monday, back their claims that dozens of energy companies schemed to drive up wholesale electricity costs to unprecedented levels during California's 2000-01 power crisis. The alleged tactics included shifting electricity out of and back into the state to evade price caps, idling power plants to cause shortages and creating phony congestion on the power grid.

"We asked that all of America be allowed to see the outrage that befell California. I'm glad FERC agrees," Gov. Gray Davis said.

The power sellers, including San Diego-based Sempra Energy and the Los Angeles Department of Water and Power, have denied wrongdoing, though some have reached monetary agreements with FERC and the state to settle various complaints. They have until March 20 to file rebuttal testimony with FERC.

It was unclear exactly when the information would be released. FERC must give all parties to the refund case five days formal notice of its intent to disclose the data and an opportunity to object.

Those opposed to the release could seek a court injunction to block it, said FERC spokesman Bryan Lee. The commission was also consulting with other federal agencies that have been investigating allegations of power market manipulation, including the Justice Department.

"We have started the process here to take the necessary legal steps to lift the protective order," Lee said.

Some power sellers said FERC should not disclose the information before March 20, so that their rebuttals can be released at the same time as California's data.

"FERC should follow the process it first put in place," said Patrick Dorinson, a spokesman for Mirant Corp. "But if FERC believes it must break established process and release confidential information early, we urge FERC to wait until March 20 in order to hear both sides."

David Byford, a spokesman for Dynegy Inc., said the company "will respect whatever decision the commission makes on the matter."

Reliant Energy spokesman Richard Wheatley raised concerns about the release of proprietary information. But he said the company did not have a formal position yet on disclosure of the data.

The protective order in the refund case was initially imposed by a FERC administrative law judge. California officials have pressed for release of the evidence, which they believe will pressure FERC to grant substantial refunds for high-priced power.

"I look forward to examining the documents," Feinstein said. "I believe they will provide irrefutable evidence that the energy market was subject to wholesale manipulation."

Power sellers have played down the significance of the state's filing. They say it recycles unsubstantiated allegations and that their behavior was proper in a market that went haywire because of California's failed attempt at deregulation.

Over the past year, evidence has dribbled out of FERC and other federal agencies that points to manipulation of the market. It includes internal Enron Corp. memos outlining various tactics that energy traders used to influence electricity costs and transcripts of conversations in which traders discussed shutting down power plants to inflate prices.

The refund case has dragged on since June 2001. A FERC judge said in December 2002 that the state was due $1.8 billion in refunds for overpriced power but that power sellers are still owed $3 billion by utilities and state agencies.

Bowing to a federal court order, FERC gave the California parties 100 days to gather evidence of market manipulation and introduce it in the refund case. That process produced Monday's filing by California Attorney General Bill Lockyer, two other state agencies and California's two largest utilities Pacific Gas and Electric Co. and Southern California Edison.